Forget the Labels -- Follow the Artists

Who says that the music industry can't adapt to the digital age? Innovative moves are materializing on both ends of the fame spectrum.

Thunder RoadTo support the release of his new album, Springsteen signed up to headline the Super Bowl halftime show. Bruce thought hard about how to engage the teens and tweens out there who weren't around in the heydays of Born in the U.S.A. and Born to Run.

A time-limited free download put the iconic title track from Born to Run into the hands of Guitar Hero fans. Activision-Blizzard's (Nasdaq: ATVI) famed music game seems to skew young. Walk over to the video game section of your local GameStop (NYSE: GME) store, and you're more likely to see pimply teenagers gripping a plastic demo axe than middle-aged accountants.

Even if not every young Guitar Hero player ended up downloading that track, at least they were put on notice that Bruce would play at the Big Show this year. That's a smart buzz-builder.

You've heard all about how Radiohead took a leap of faith and gave away digital downloads of their latest albums. Then the band turned around and sold high-end box sets that packaged the CD and old-school vinyl records with swag like posters and signed memorabilia. You can't download this stuff.

Radiohead's In Rainbows shifted more than three million units. Not only did the digital distribution lead to lower overhead costs, but Radiohead changed the role played by record labels by working with Warner Music (NYSE: WMG) . That's great news for artists and fans.

OK, but most of us don't have a million fans!Josh Freese (yep, the drummer for The Vandals) just released an album recorded in his home studio through a promotion service called Topspin, which is run by former Yahoo! (Nasdaq: YHOO) Music executive Ian Rogers. The whole alt-rock experience can be downloaded for $7. $15 also buys you a CD/DVD disc set.

For $50, you get the album, a t-shirt, and a five-minute phone call from the artist. The $2,500 package adds a drum lesson (or foot massage if you're not a drummer), a signed drum, and any 3 items out of Josh's closet. Download that if you can!

"In the evolving music economy, it is critical to understand that different fans consume in different ways," says music promoter Jason Feinberg, "The Internet has given us the ability to cater to each of them on their own terms."

As the last stand-alone music company, Warner Music must throw out their old ideas about how to run a record label out the window. They’re currently experimenting with new ways to work with artists and distribute music, but time will tell whether Warner Music will thrive as a company and for its shareholders.

Stock up on companies like Apple (Nasdaq: AAPL) to ride the digital wave. iTunes surpassed Wal-Mart (NYSE: WMT) last spring to become the world's biggest music outlet.

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment icon found on every comment.

Some good advice here - as physical recordings become even more and more challenging to support with the lumbering infrastructures of labels like Warner (and Universal, and Sony BMG, or whatever conglomerated forms the big three take today), it's also important to watch the extent to which their business models adjust to take advantage of other revenue streams like management, merch, touring. These "360-degree" models will win out more and more.

And don't forget the touring industry - labels might be in deep, but just ask LiveNation, or Ticketmaster, or the Messina Group, or Mathew Knowles how they're doing - pretty well.